Vanuatu Investment Vehicles

If you are interested in investing in Vanuatu, below you can find all types of  Vanuatu Investment Vehicles.

Vanuatu Investment Vehicles – Overview of Vanuatu’s Financial Sector

1. The finance sector in Vanuatu, consisting of banks and insurance providers, contribute about 7% to Vanuatu’s GDP. In 2004, this represented a growth of 9.3% over the previous year.
2. The financial sector in Vanuatu consists of the Reserve Bank of Vanuatu (RBV), banks (both domestic and off-shore), credit unions, money exchanges and remitters and insurance companies.
3. The banking sector is relatively small, consisting of five domestic banks and seven off-shore banks all of which are regulated by the RBV. Greater regulation of the off-shore banks, conducted by the RBV enforcing local physical presence, led to a dramatic drop in the number of off-shore banks operating in Vanuatu.
4. Insurance companies are regulated by the Vanuatu Financial Services Commission (VFSC) and money exchanges and remitters are regulated by the Ministry of Finance through the Customs and Revenue Department.
5. Remittance businesses in Vanuatu are limited to a Western Union franchise operated by the Vanuatu Post Office and a Moneygram operator. The remittance sector in Vanuatu is relatively small, servicing mainly the tourist industry.

Vanuatu Investment Vehicles – Overview of Vanuatu’s DNFBPs

6. The designated non-financial businesses and professions (DNFBPs) that operate in Vanuatu consist of trust companies and service providers (TCSPs), law firms, accountants, gaming agencies, real estate agents and car dealers. These entities are all defined as financial institutions under recent amendments to the Financial Transactions Reporting Act (FTRA) and therefore fall within the AML/CFT regime in Vanuatu.

Vanuatu Investment Vehicles – Casinos

7. One casino currently operates in Vanuatu, although there are a number of applications for licenses currently under consideration. Licenses for casinos are issued by the Department of Customs and Revenue. Foreign applicants for a casino license must first receive a clearance from the Vanuatu Investment Promotion Authority (VIPA) which will determine if the applicant is of a good character and that there is a viable business plan. Casinos are subject to the FTRA and therefore subject to supervision by the VFIU.

Vanuatu Investment Vehicles – Shipping Register

8. The shipping law is modelled on that of Liberia and non statutory US maritime law applies. Special surveys are required to register ships that are more than 20 years old. There are no obligations to employ Vanuatu citizens as crew or officers although the Vanuatu Maritime College produces qualified seafarers. There are regional offices in New York, London, Athens, Singapore, Hong Kong and Yokohama which may effect registration. All of the major international conventions apply. Ships registered in Vanuatu are usually owned by Vanuatu companies. On registration, a fee is payable which is at a reducing graduated rate based on net tonnage. The annual tonnage tax is on a reducing scale from 0.25 to 0. 10 per tonne. There is no stamp duty bills of sale. There is no requirement for a shipping company to submit audited accounts. There is an emergency flag transfer procedure which may be invoked even where the transfer does not have the approval of the existing flag state. Charges registered under the Maritime Act need not also be registered under the Companies Act.

Vanuatu Investment Vehicles – Company and Trust Service Providers (CTSP)

9. Vanuatu has Eleven Trust Service Providers operating in Port Vila. These are licensed as companies through the Registrar of Companies within the VFSC and are also subject to their obligations under parts 2 and 3 of the FTRA. Company Service Providers will be licensed under the new CTSP Act.

Vanuatu Investment Vehicles – Lawyers

10. Lawyers in Vanuatu must register with the Law Council in order to practice. Registration requires that an applicant:

1. holds a law degree or similar qualification from a University or such other appropriate institution recognised by the law Council; and
   1. is a Ni-Vanuatu citizen who is admitted as a barrister and/or solicitor in a Commonwealth jurisdiction; or
   2. not being a Ni-Vanuatu citizen admitted in a Commonwealth jurisdiction, has at least two years post supervised practical, legal experience acceptable to the Law Council;
2. is resident in Vanuatu.

11. Lawyers were brought under the FTRA through amendments introduced in 2000 but only to the extent that the lawyer ?receives funds in the course of his or her business for the purpose of deposit or investment, or settling real estate transactions (whether or not the funds are deposited into a separate trust account)?. The 2006 amendments expanded the scope of activities that would subject lawyers to the requirements of the FTRA.

Vanuatu Investment Vehicles – Accountants

12. Accountants, like lawyers, were bought under the FTRA under amendments introduced in 2000 but only to the extent that the accountant ?receives funds in the course of his or her business for the purposes of deposit or investment (whether or not the funds are deposited into a separate trust account)?. This scope was widened by the introduction of amendments in 2006.

Vanuatu Investment Vehicles – Non-Profit Organisations (NPOs)

13. NPOs in Vanuatu are governed by the Charitable Organizations Act. AML/CFT legislation is found in the Proceeds of Crime Act, the Financial Transactions Reporting Act, the Counter Terrorism and Transnational Crime Act, and the Criminal Procedure Code. This legislation does not specifically address NPOs, however there is no indication that an NPO is in any way exempt from any of the asset freezing or seizing measures contained in the legislation.?

Overview of commercial laws and mechanisms governing legal persons and arrangements

14. Legal persons in Vanuatu are created through the following legislation:

1. Companies Act [CAP 191]
2. International Companies Act [No. 32 of 1992]
3. Charitable Associations Act;
4. Business Names Act;

Vanuatu Investment Vehicles – Company Law

Vanuatu company law was previously only found in the Companies Act (Cap 191). This Act is based on the UK Companies Act 1948 as altered and extended by the UK Companies Act 1967. Thus, in addition to having the usual limited liability company, it is also possible to have a company limited by guarantee and an unlimited company.

Companies set up under this Act to do offshore work are known as exempted companies, with local companies undertaking domestic work. An exempted company is one whose business is carried on outside Vanuatu although, provided there is no trading within Vanuatu, this can include matters directed from Vanuatu. Local companies are permitted to carry on business in Vanuatu and are required to make full returns, although their accounts need not be audited if their annual turnover is less than approximately US$200,000.

Companies are also divided between public and private (i.e. where there are 50 members or less and the transfer of shares is restricted). If the company is to be a local company details of the beneficial ownership of the company must be given. Details of the beneficial ownership of exempted companies are not disclosed.

Vanuatu Investment Vehicles – International Companies

The International Companies Act (1992) provides a type of company called an international company. Both local and exempted companies can be converted into an international company. The following information applies to the International Companies Act, unless otherwise indicated.

(i) Formation

It is possible to reserve names, but names may not be used where they inappropriately suggest a financial institution or a connection with an official government department or are similar to or the same as an existing company.

One copy of the proposed constitution must be submitted to the Financial Services Commission. Separate articles are not necessary. The company can have the ? Limited? or an abbreviation thereof in any language. There need only be one incorporator under the constitution who need not be a shareholder. The government fee of US$150 is paid on formation and the annual government fee of US$300 is payable on 30 June each year (reduced to US$150 if the company was not in existence the previous 31 December).

(ii) Pre-incorporation contracts

Pre-incorporation contracts may be ratified by an international company upon incorporation.

(iii) Share capital

Complete flexibility with shares which may take any form or as an alternative there need not be a share capital. A company may purchase its own shares and may also cancel them, so long as at least one shareholder remains who is not the company itself.

(iv) Members

A minimum of one member is required, and he/she/it may be of any nationality.

(v) Officers

The company may choose whether or not to have officers other than one director, who may be a corporation, and can be resident anywhere.

(vi) Registered agent

There must be a registered agent in Vanuatu. The statutory books (Minute Book, Register of Officers and Register of Charges) can be kept anywhere in the world, but the Vanuatu Financial Services Commissioner (“the Commissioner”) may direct that they be brought to Vanuatu. The register of members must be maintained in Vanuatu.

(vii) Meetings

It is not necessary to have a physical annual general meeting. The directors can meet by any means anywhere in the world.

(viii) Accounts and annual returns

The accounts may be kept anywhere in the world, but must be brought to Vanuatu if the Commissioner directs. There is no annual return. An annual certificate is required certifying:

1. there has been no public subscription for shares in the company;
2. the company books and records have been properly maintained; and
3. the company has not carried on any business in Vanuatu, except as permitted by the Act.

(ix) Confidentiality for international (and exempted) companies

The confidentiality of international (and exempted) companies is provided for in two ways:

1. by keeping all statutory records confidential and protected by the law; and
2. by allowing trials relating to them to be held in camera with no public record.

In certain circumstances, information about the Vanuatu Companies can be shared with authorities in other countries.

(x) Distribution of assets and dissolution

A company may at any time pay dividends out of capital or gift assets to third parties, so long as the company remains solvent.

(xi) Re-domiciliation

Vanuatu companies may re-domicile to another jurisdiction. It is also possible, where the current law governing the company does not preclude it, for a non Vanuatu company to re-domicile to Vanuatu. The shareholders must agree and the creditors must not be prejudiced. An approval for re-domiciliation is good for three years.

Vanuatu Investment Vehicles – Insurance Companies

Local and International insurance companies including Captive, Intermediaries, Managers and Re-insurers may be set up under the Insurance Act 2005 & Insurance Regulations 2006 and the Protected Cell Company Act 2005.

Applications are dealt with by the Commissioner. Evidence of beneficial ownership, financial standing, experience of the managers and a business plan must be submitted.

Vanuatu Investment Vehicles – Trusts

English law of general applicability that applied as of 30 July 1980, including legislation based on the UK Perpetuates and Accumulations Act 1964, is applicable. One possible disadvantage is that the rule against accumulations beyond 21 years may cause problems for some long‑term discretionary settlements. The perpetuity period is lives in being and 21 years or 80 years.

Trusts are not publicly registered although there is a stamp duty payable on the instrument constituting them. The stamp duty relates to the value of the property put into the settlement by instrument (0.5 per cent subject to a minimum of Vt7,500).

Vanuatu Investment Vehicles – Offshore Trusts

New legislation has yet to be passed to provide measures for: (a) the exclusion of foreign forced heirship; (b) asset protection; (c) recognition of the proper law of trust and the abolition of the rules against perpetuates and accumulations. Investor protection: setting up banks and investment vehicles.

Vanuatu Investment Vehicles – Banks

It is technically possible to have an exempted company registered as a bank under the international Banking Act, in which case full disclosure requirements apply. The International Banking Act was effective from 1 January 2003 and the information that follows reflects the new provisions.

An international bank must only undertake offshore work. However it may do business in Vanuatu either with other exempted banks or in a manner that is incidental to offshore business. An international bank is free from many of the conditions that normally apply to onshore banks. The principal attributes are:

1. shareholder’s interests of not less than US$500,000;
2. full disclosure of beneficial owners and key management;
3. no more than 20 per cent change of ownership without government approval;
4. bank and other references required;
5. licences non‑transferable;
6. only banking activities allowed;
7. quarterly returns to be filed with the Banking Supervisor;
8. annual audited accounts to be filed;
9. the chief executive officer must be approved by the Banking Commissioner,
10. bank must comply with international capital adequacy guidelines;
11. accounts need not be published;
12. profits are exempt from taxes;
13. all transactions are exempt from exchange controls by statute;
14. suspicious transaction reporting is mandatory;
15. bank must have physical premises and one or more full time Vanuatu resident employees who are knowledgeable about the day to day running of the bank.
16. periodic inspection by the Reserve Bank of Vanuatu.

An international bank must use the word ?bank? or an equivalent to indicate its activities. Whilst the above relaxed requirements apply where a recognised international financial institution is to be the beneficial owner of the offshore bank, higher criteria are applied where the owner cannot be so described.

In such a case a higher paid up capital may be required and in addition references will be required as well as evidence that the bank will be run by competent persons of probity who are suitably experienced in the running of such institutions. In order to evaluate this information full details of the intended activities of the bank are required, including a business plan.

There has been a policy of not granting licences to banks that intend to provide chequing facilities for members of the public. There are currently approximately seven licensed International banks.

Vanuatu Investment Vehicles – Trust Companies

Except where an exempted company is trustee for only one particular trust, professional trust business, including acting as an executor and administrator of estates, comes under the Trust Companies Act (Cap 69). Trust companies must be licensed and must have a sufficient paid up capital (US$125,000 if incorporated in Vanuatu, otherwise US$500,000). In addition, full details of those running the company and of the beneficial owners must be with suitable references. The trustee must have the minimum paid up capital.

Vanuatu Investment Vehicles – Investment Vehicles

Legislation (the Prevention of Fraud (Investment) Act (Cap 70)) exists for dealers in securities.

Separate pieces of legislation have also been introduced to establish mutual funds (Mutual funds Act No. 38 of 2005) and the creation of unit trusts (Unit Trust Act No. 36 of 2005).

Fund managers must be resident in Vanuatu.

Vanuatu Investment Vehicles – Mutual Funds

This Act provides for the licensing of Mutual Funds and mutual fund administrators. A mutual fund is an investment scheme that allows investors to pool their funds. The investors can receive profits from acquiring, managing and selling property and other investments. A mutual fund may be a company, a unit trust or a partnership. Mutual funds are an accepted form of investment in many jurisdictions. The Act protects investors by allowing only licensed mutual funds to operate, and by requiring administrators of mutual funds to be licensed. The Bill permits the licensing of foreign mutual funds (operating within Vanuatu but established outside Vanuatu) and general mutual funds.

The Vanuatu Financial Services Commission administers the licensing regime. The Act gives the Commission powers to effectively supervise the operation of mutual funds.

Unit Trusts

This Act provides for the registration of Unit Trusts and the licensing of unit trust managers. A unit trust is an investment scheme established under a trust deed that allows investors to buy units in the trust. The units entitle the unit holders to participate in the income, profits and gains arising out of the acquisition, holding, management or disposal of all kinds of property. The property is held on behalf of the unitholders by a trust company. Unitholders can redeem their units by selling them back to the trust. Unit trusts are an accepted form of investment in many jurisdictions. The Act protects investors by allowing only registered unit trusts to operate, and by requiring managers of unit trusts to be licensed. The Vanuatu Financial Services Commission administers the registration and licensing regime and the Act gives the Commission powers to effectively supervise the operation of unit trusts.

Exchange Control

There is no exchange control.

Money Laundering

Vanuatu has extensive legislative mechanisms dealing with money laundering. They operate on two levels:

• Prevention: The Financial Transactions Reporting Act 2000 sets out mandatory suspicious transaction reporting requirements which are enforced by Vanuatu’s Financial Intelligence Unit. At a transactional level, all local banks have extensive “know your customer” protocols. It is on the strength of this framework that Vanuatu has remained off the Financial Action Task Force blacklist; and
• Criminalisation: Money laundering is a criminal offence under the Proceeds of Crime Act 2002. The terms “property” and “proceeds of crime” are defined broadly to encompass property of any type that directly or indirectly represents the proceeds of crime. Powers of confiscation, freezing and forfeiture are all available under the Act. Vanuatu has established a Transnational Crime Unit dedicated entirely to the investigation of money laundering and terrorist financing.

Vanuatu Investment Vehicles – Taxation

(a) Direct taxation

Vanuatu has no income tax, capital gains tax, tax on wealth, estate duty or inheritance tax. An international company is granted by statute a 20 year exemption from taxation on the condition that it remains solvent.

As Vanuatu does not have income tax, there are no double taxation agreements.

(b) Indirect taxation

The following domestic taxes exist:

• Import and export duties;
• Harbour and airport dues;
• Licence fees on businesses;
• VAT of 12.5 % (not applicable to offshore transactions);
• Stamp duty; 2% on land transactions; 2% on leases; 0.6% on share transfers (1.8 % if bearer securities or 4% if company has an interest in land situated in Vanuatu); and 1% on other documents;
• Debits tax on each financial transaction varying from 7? to US$3.00.
• Landlord tax on property rental of 12.5%